Debate Over AEP, FE Power Purchase Plans Heats Up at Recent Ohio Conference
February 29, 2016
Debate Over AEP, FE Power Purchase Plans Heats Up at Recent Ohio Conference
Following the 20th annual Ohio Energy Management Conference, recently hosted by the Manufacturers’ Education Council in Columbus, Market Monitor sat down with J.D. Burrows, Vice President of Marketing for GDF SUEZ Energy Resources, who presented a talk at the show, for a recap of some of the hot topics discussed at the event.
How was the 2016 conference?
We really enjoyed being a part of the conference. The show continues to bring a wide range of customers and energy professionals together to discuss issues that are important to Ohioans. It’s a great educational platform for learning more about how the market operates, new opportunities taking shape in Ohio and around the Nation, and the key influences impacting the region. This year’s event attracted more than 500 attendees and certainly did not disappoint in terms of content.
Some of the discussions seemed to have garnered a lot of press coverage.
Yes, they did. One panel discussion – Powering the Future of Ohio’s Economy – featured a particularly lively debate on the Power Purchase Agreements (PPAs) of AEP and FirstEnergy, which are currently being reviewed by the Public Utilities Commission of Ohio (PUCO).
The session was moderated by Jennifer Klein, president of the Ohio Chemistry Technology Council. Panelists included Nick Akins, Chairman, President, and CEO of AEP; Robert Flexon, President and CEO of Dynegy; Michael Mizell, Vice President and Market Business Leader of AES; Andre Porter, PUCO Chairman; Samuel Randazzo, General Counsel of Industrial Energy Users – Ohio; and Leila Vespoli, Executive Vice President, Markets, and Chief Legal Officer of FirstEnergy.
This is a big issue because the passage of these plans would force Ohio ratepayers to subsidize income guarantees for the companies’ aging, uneconomic plants. With its proposal, FirstEnergy would force Ohio customers to use (and pay for) all power generated by its David-Besse nuclear plant and its W.H. Sammis coal-fired plant – and do this for eight years. AEP’s plan would require customers to do the same for 2,671 MW of generation from nine of the utility’s units as well as its share of Ohio Valley Electric Corp.’s generation, which totals 423 MW.
The generation from these plants essentially lost its competitive advantage with the U.S. shale boom, which brought cheap natural gas into the market as an alternative fuel source.
Opponents have estimated that implementing both PPAs could come with a hefty price tag for consumers, totaling more than $5 billion. Flexon, Dynegy’s President and CEO, believes the state can offer the same power at a significantly less cost. During the talk, he essentially equated the current PPAs to a gas station that charges $5 for a gallon of gas when market prices are less than $2 per gallon.
Dynegy is part of the Alliance for Energy’s Fight the Hikes campaign, which was launched in response to the PPAs to promote fairness and competition among electric utilities and advocate for market solutions that will ensure the adequate and fairly priced supply of electric power to Ohio’s residents and businesses. See more on the initiative at www.fightthehikes.com.
AEP and FirstEnergy argued that profit guarantees are necessary to maintaining grid reliability. They said they are ensuring consistent generation contributions within Ohio and keeping jobs from moving across state lines. The two utilities also claimed the plans will save money for end users in the long run. However, Flexon argued the PPAs are based on inflated natural gas prices, overstated demand increases, and other factors that would exaggerate revenues from the aging power plants.
As you can probably imagine, the debate was both dynamic and heated, to say the very least. Press coverage of the discussion can be viewed here and here. Needless to say, this will likely be a topic that continues to garner a lot of attention as the PUCO reviews the issues.
What were some of the other themes addressed at the event?
Overall, the discussions were very forward looking. Most centered on the different technologies, tools, and insights customers can deploy to achieve greater flexibility in reducing consumption.
This overall tone, very interestingly, was in stark contrast to the message AEP and FirstEnergy are promoting through their PPA plans. Wanting to keep old, inefficient power plants running at the expense of the market and the end user was an odd juxtaposition to what consumers are clearly seeking in today’s market.
Customer-oriented solutions that provide users with greater control and flexibility in how they manage their load are most certainly where this market is headed. The passage of these two plans could have an adverse impact on that movement.
Tell me about your presentation.
My talk centered on the evolution of energy buying and the shifting procurement paradigm. Specifically, I presented a view on integrated solutions in energy buying.
For years, retail energy providers have focused the conversation on managing price risk alone. But today’s industry is going through a noteworthy transition, with new demands coming from customers, grid operators, regulators, and environmentalists.
Making the connection between price and quantity – i.e., how electricity is used, how much is used, and how usage is linked to price – is essential in the current energy environment. Technology is playing a critical role in bridging that gap by allowing suppliers to offer integrated solutions that incorporate tactics such as demand response and distributed generation to maximize load management and efficiency initiatives.
This is where the energy industry is headed, and GDF SUEZ Energy Resources is well positioned to help consumers take advantage of the one-stop-shop supplier business model. Our new mantra for the energy market is as follows: Through our products and services, GDF SUEZ Energy Resources provides the confidence of knowing you’re getting the power you need, when you need it, without interruption, all at the lowest possible reliable cost.